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FastMatch acquisition

This deal diversifies our product offering, opening up a new asset class for Euronext and the potential for further development opportunities in the FICC space. It establishes Euronext’s presence in the FX segment, the largest market globally.

Euronext will bolster FastMatch’s European presence through increased access to institutional clients across Europe.

Real-time and historical data products will be rolled out, and FastMatch and Euronext will aim to achieve presence in the FX derivatives space.

Strategic rationale

The G20 post-credit crisis response has created a regulatory drive for Over-The-Counter (“OTC”) and dark trading towards transparent, neutral and centrally cleared markets. New capital requirements further underpin an urgent need for greater efficiency and deep structural change of the OTC landscape. Nowhere is this more relevant than in the $5.1 trillion daily foreign exchange market. This new environment, driven by regulatory changes and the client’s need for more transparency and efficiency has resulted in a clear trend of electronification of spot FX trading where 66% of trading in 2016 was electronic, growing from 55% in 2010.

FastMatch is a disruptive institutional FX ECN providing customers access to large pools of diversified spot FX liquidity at unparalleled speed. With colocation in three data centers (London, New York and Tokyo), FastMatch offers clients the fastest, most scalable and versatile technology available in the market. FastMatch’s cutting-edge proprietary technology offers its established client base, many Tier-1 banks, non-bank market makers, broker-dealers, asset managers and hedge funds, unparalleled execution capabilities (>10x lower latency versus most peers), state-of-the-art smart order routing and highly customizable liquidity pools. FastMatch’s superior technology allows it to operate with a highly efficient cost structure which in turn gives it the strategic flexibility to competitively price its best-in-class product offering.

FX Tape™

This new and innovative market data product will improve post-trade transparency in FX markets and allow market participants to monetize their trading data. FX Tape will also serve as a central reference point for Spot FX transacted prices helping market participants evaluate best execution performance.

This product will be available for distribution to thousands of market participants and vendors across the world via FastMatch’s and Euronext’s distribution networks. It will significantly improve transparency in the FX market and execution quality. Contributors of FX Tape will participate in revenue shared based on their market share of contributions on a monthly basis

In November 2017, FastMatch announced that individuals may now purchase FX Tape data from its website at a cost of €40 a month, using their credit cards.

Typically such trading data costs thousands of euros a month and requires special programming in order to receive it, so the average consumer cannot access the data. However, FastMatch is now making this data available at low cost at https://tape.fastmatch.com.

About FastMatch

About FastMatch

FastMatch is an Electronic Communication Network for foreign exchange trading. FastMatch strives to offer its customers access to large pools of diversified liquidity at unparalleled speed with complete transparency in the optimal location. Its award winning technology gives FastMatch an important speed advantage and has the capability of handling thousands of clients simultaneously. Clients include retail brokers, institutions, banks, hedge funds, and proprietary trading firms. www.fastmatchfx.com

More information

Amsterdam, Brussels, Dublin, Lisbon, London and Paris – 14 August 2018 – Euronext, the leading pan-European exchange in the Eurozone, today announced the acquisition of approximately 8% of additional interest in FastMatch, a global FX spot market operator, operating as a Euronext company since August 2017. In combination with the stake in the Company that Euronext acquired in August 2017, Euronext now owns an approximate 97.3% interest in FastMatch.

The additional interest was acquired by purchasing the remaining shares owned by Dmitri Galinov, co-founding CEO of FastMatch, for $.001 per share, following his termination for cause by FastMatch. The shares were purchased pursuant to the agreement signed at the time of the acquisition of the Company.

Kevin Wolf, US Head of FICC for Euronext and member of the FastMatch Board of Directors since September 2017, was appointed CEO of FastMatch in June 2018 by the Board of Directors of FastMatch, Inc., following Galinov’s termination.

New York, 21 November 2017 – FastMatch, Inc., the fastest growing FX spot market operator, which has operated as a Euronext company since August 2017, announced today that individuals may now purchase FX Tape data from its website at a cost of €40 a month, using their credit cards.

FX Tape is a new and innovative market data product that improves post-trade transparency in FX markets and allows market participants to monetize their trading data. FX Tape will also serve as a central reference point for spot FX transacted prices, helping individuals and companies to benchmark their FX rates. Typically such trading data costs thousands of euros a month and requires special programming in order to receive it, so the average consumer cannot access the data.

“FastMatch is bringing transparency in spot FX to anyone with a credit card”, said Dmitri Galinov, CEO of FastMatch, Inc. “Now, for a small monthly fee, individuals and companies can view the latest FX rates transacted on interbank markets. This information empowers them to demand better FX rates from vendors.”

The FX Tape is open to all contributors under an open access model with a percentage of the net revenue generated by FX Tape shared with contributors, according to the volume contributed.

New York, 2 November 2017 – FastMatch, Inc., the fastest growing FX spot market operator, which has operated as a Euronext company since August 2017, announced today that it has opened a sales office in Greenwich, CT.

High-quality level of service is one of the differentiating features contributing to FastMatch’s growth and success. In order to maintain this level of service, it is important for FastMatch to be located near its major customers. The opening of the Greenwich, CT office in addition to FastMatch’s offices in New York, London and Moscow is an important step in expanding its touch points with major customers.

“The FX market has seen a significant rise in the use of electronic trading tools by the buy side”, said Dmitri Galinov, CEO of FastMatch. “We are excited to be closer to our hedge fund clients and help them with their transition to new trading methods in FX.”

About FastMatch
FastMatch is a new Electronic Communication Network for foreign exchange trading. FastMatch strives to offer its customers access to large pools of diversified liquidity at unparalleled speed with complete transparency in the optimal location. Its award-winning technology gives FastMatch an important speed advantage and has the capability of handling thousands of clients simultaneously. Clients include retail brokers, institutions, banks, hedge funds, and proprietary trading firms. FastMatch is a company of Euronext, the leading pan-European exchange in the Eurozone.

New York, 25 September 2017 – FastMatch, Inc., the fastest growing FX spot market operator, which operates as a Euronext company since August 2017, announced today the launch of FX Tape. This new and innovative market data product will improve post-trade transparency in FX markets and allow market participants to monetize their trading data. FX Tape will also serve as a central reference point for Spot FX transacted prices helping market participants evaluate best execution performance.

“FX Tape is a significant stepping stone to building a more transparent market globally while providing a way for market participants to monetize their trade data”, said Dmitri Galinov, CEO of FastMatch, Inc. “This product is the culmination of three years of dedicated effort.”

FX Tape will publish real-time post-trade information collected from market participants in aggregated and delayed fashion to minimize market impact. This product will be available for distribution to thousands of market participants and vendors across the world via FastMatch’s and Euronext’s distribution networks.

The FX Tape will be open to all contributors under an open access model with a percentage of the net revenue generated by FX Tape shared with contributors, according to the volume contributed.

About FastMatch
FastMatch is a new Electronic Communication Network for foreign exchange trading. FastMatch strives to offer its customers access to large pools of diversified liquidity at unparalleled speed with complete transparency in the optimal location. Its award winning technology gives FastMatch an important speed advantage and has the capability of handling thousands of clients simultaneously. Clients include retail brokers, institutions, banks, hedge funds, and proprietary trading firms. FastMatch is a company of Euronext, the leading pan-European exchange in the Eurozone.

Amsterdam, Brussels, Lisbon, London and Paris – 14 August 2017 – Euronext today announces it has completed the acquisition of c.90% of FastMatch, the fastest growing Electronic Communication Network (“ECN”) in the spot foreign exchange market, after having received regulatory and anti-trust approvals. This follows the announcement of 23 May 2017 on the signing of the agreement with the existing shareholders of FastMatch.

Consistent with Euronext’s “Agility for Growth” strategy, this transaction diversifies Euronext’s top line, accelerates its growth profile and allows the group to extend its “best execution” value proposition to an additional asset class.

Acquisition of FastMatch, Inc. (“FastMatch”) – the fastest growing Electronic Communication Network (“ECN”) in the spot Foreign Exchange (“FX”) market with leading-edge technology, entrepreneurial spirit and access to a large, transparent and diversified pool of liquidity at unrivalled speed and capacity. After four years of consecutive growth, in Q2 to date FastMatch registered record ADV of $20.8 billion.

Key highlights of the transaction:

Acquisition of a c.90% interest in FastMatch for initial cash consideration of $153 million at closing (on a debt-free cash-free basis), a contingent earn-out payment for an additional $10 million and customary minority rights for the management of FastMatch that will remain committed to the development of the business and stay invested with a c.10% interest.

Amsterdam, Brussels, Lisbon, London and Paris – 23 May 2017 – Today, Euronext announces the acquisition of c.90% of FastMatch, Inc. for $153 million initial cash consideration. FastMatch’s management will remain invested with a c.10% interest, with minority rights. Closing is subject to regulatory and anti-trust approvals, and is expected to occur in Q3 2017.

This exciting bolt-on acquisition is part of Euronext’s strategy to actively leverage our balance sheet flexibility to capture value accretive opportunities and to accelerate growth and diversification of our revenue base in line with our strategic plan ambitions. As such, the investment in FastMatch will not consume any resource dedicated to the deployment of our Agility for Growth initiatives (€100 to €150 million), which remains a key priority for Euronext.

This transaction establishes Euronext’s presence in the FX segment (the largest market globally), diversifies Euronext’s top line, accelerates its growth profile and allows the group to extend its “best execution” value proposition to an additional asset class. This transaction will meet Euronext’s key quantitative criteria as set out on 13 May 2016 at Investor Day (i.e., ROCE > WACC within year 3), and will be immediately EPS accretive without factoring in any synergies.

“The acquisition of FastMatch breaks new ground for Euronext, through expansion into the FX market which is the world’s largest traded asset class. This will broaden the spectrum of products we provide to capital market users, whilst meaningfully diversifying our revenue and creating long-term value and growth for customers and shareholders. The combination of FastMatch’s in-depth FX expertise, leading technology platform, diverse customer base and entrepreneurial spirit with Euronext’s scale, strength and credibility, will position Euronext as a trustworthy infrastructure provider servicing a market where participants are increasingly looking for transparency, reduced capital costs, cutting-edge trading and long-term clearing solutions. The transaction is consistent with our disciplined approach to M&A and our Agility for Growth strategic plan announced on 13th May 2016, including our goal of attracting the best talent and entrepreneurs”, said Stéphane Boujnah, Chairman and CEO of the Managing Board of Euronext NV.

Dmitri Galinov, Founder and CEO of FastMatch commented: “We are very excited to become part of Euronext, an exchange group on the frontline of innovation and agility in the industry. Together, we will accelerate our vision of bringing transparency, best-in-class technology and execution to FX markets globally. Our superior technology will serve as catalyst to Euronext’s strategic ambitions in growing into the FICC in Europe.”

Strategic Rationale

The G20 post-credit crisis response has created a regulatory drive for Over-The-Counter (“OTC”) and dark trading towards transparent, neutral and centrally cleared markets. New capital requirements further underpin an urgent need for greater efficiency and deep structural change of the OTC landscape. Nowhere is this more relevant than in the $5.1 trillion daily foreign exchange market. This new environment, driven by regulatory changes and the client’s need for more transparency and efficiency has resulted in a clear trend of electronification of spot FX trading where 66% of trading in 2016 was electronic, growing from 55% in 2010.

FastMatch is a disruptive institutional FX ECN providing customers access to large pools of diversified spot FX liquidity at unparalleled speed. With colocation in three data centers (London, New York and Tokyo), FastMatch offers clients the fastest, most scalable and versatile technology available in the market.

Since it was established in 2012 by Credit Suisse and FXCM, FastMatch has been able to establish a sizeable position in the ECN space. Since 2015, FastMatch has more than doubled its market share, growing Average Daily Volume (“ADV”) by 52% in 2016, whilst achieving technological and operational independence from Credit Suisse and FXCM. In Q1 2017, FastMatch’s ADV grew by 61% Year-over-Year to $17.7 billion ADV in a relatively flat volume environment with significant market share gains.

Further Growth Opportunities

Euronext will bolster FastMatch’s European presence through increased access to institutional clients across Europe. Additionally, the roll-out of real-time and historical data products will be pursued in the short-term. In the mid-term, FastMatch and Euronext will aim to achieve presence in the FX derivatives space.

Financial Impacts

The total consideration to be paid at closing by Euronext is $153 million for c.90% of the share capital (on a debt free cash free basis), with a $10 million contingent earn-out. The management will remain invested with a c.10% ownership post-closing with minority rights.

As of Q1 2017, FastMatch generated $5.8m revenue, up 48.8% compared to Q1 2016, and $2.4 million EBITDA (41.0% margin), 3.6x the EBITDA of Q1 2016.

The transaction will be funded through debt facilities. Post-transaction, Euronext’s net leverage ratio pro- forma will remain below 0.1x based on EBITDA 2016 and net debt as of 31 March 2017 (pro forma the acquisition), well below most of its peers, providing significant headroom for further topline diversification.

The transaction will be immediately accretive to Euronext’s earnings and mid-single digit EPS accretion is expected in the medium-term before synergies. The transaction is fully consistent with Euronext’s disciplined M&A policy and will accelerate the growth profile of the group.

Appendix 1: Key Financials of FastMatch

FY 2013

FY 2014

FY 2015

FY 2016

Q1 2016

Q1 2017

ADV ($bn)

2.7

7.7

8.4

12.7

11.0

17.7

Revenue ($m)

3.1

9.9

12.3

18.0

3.9

5.8

EBITDA ($m)

-0.7

1.4

1.6

5.3

0.7

2.4

% margin

-23.8%

14.2%

12.7%

29.7%

16.9%

41.0%

Source: Company

About Euronext
Euronext is the leading pan-European exchange in the Eurozone with nearly 1,300 listed issuers worth close to €3.5 trillion in market capitalisation as of end March 2017, an unmatched blue chip franchise consisting of 25 issuers in the EURO STOXX 50® benchmark and a strong diverse domestic and international client base.
Euronext operates regulated and transparent equity and derivatives markets. Its total product offering includes Equities, Exchange Traded Funds, Warrants & Certificates, Bonds, Derivatives, Commodities and Indices. Euronext also leverages its expertise in running markets by providing technology and managed services to third parties. Euronext operates regulated markets, Alternext and the Free Market; in addition it offers EnterNext, which facilitates SMEs’ access to capital markets.
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About FastMatch

FastMatch is a new Electronic Communication Network for foreign exchange trading. FastMatch strives to offer its customers access to large pools of diversified liquidity at unparalleled speed with complete transparency in the optimal location.

Its award winning technology gives FastMatch an important speed advantage and has the capability of handling thousands of clients simultaneously. Clients include retail brokers, institutions, banks, hedge funds, and proprietary trading firms.